Fijian Tourism Talanoa

November 2017 Strategic Role of Airways & Core Objectives

Types of Airlines:

National Developer Network Carrier Niche Carrier Low Cost

Core Strategic tool to Profitability and support Profitability Objectives Profitability develop country national development e.g. Tourism

Heavily subsidised Not subsidised

E.g. , E.g. , , E.g. Virgin E.g. EasyJet, Etihad, Qatar Atlantic Ryanair, South -west

Fiji Airways

Fiji Airways 2 Strategic Role of Fiji Airways & Core Objectives

National interest and profitability are not mutually exclusive – Fiji Airways should focus on balancing profitability aligned to national interests

One of few National Carriers who successfully managed to do both

The strategic role of Fiji Airways is to be a profitable national airline

Fiji Airways 3 Strategic Role of Fiji Airways & Core Objectives

Strategic Role To be a profitable national airline

Core Objectives:

 Sustained profitability  Support inbound tourism and home originating market  Grow with smart investment  Deliver exceptional service with Fijian touch  Create a culture that encourages innovation and efficiency and rewards creativity

We are the National Airline of Fiji proudly connecting our country to the world with exceptional Fijian hospitality

Through innovative Employees determined to exceed the expectations of our Customers, we are committed to delivering sustained profitability in a socially responsible manner Fiji Airways 4 Air Access – The Reality

Fiji Airways 5 Air Access Air Service Agreements – ASAs ♦ Bilateral air transportation agreement between two sovereignties regulating the air services.

♦ Altogether there are 28 ASAs that Fiji has negotiated:

1. 15. 2. Canada 16. Niue 3. Chile 17. Papua New Guinea 4. China 18. 5. Cook Island 19. 6. France 20. Solomon 7. Germany 21. South Korea 8. 22. Thailand 9. India 23. 10.Japan 24. Turkey 11. 25. 12.Malaysia 26. United Kingdom 13.Marshalls 27. USA 14. 28.

Fiji Airways 6 Air Access Air Service Agreements - Types of ASAs

Traditional ASA Liberal ASA Open Skies

Specifies number of Provides flexibility Unrestricted carriers, aircraft, flights, and less government flights, seats, seats, routes, cities and control over number routes and pricing mechanisms of carriers, aircraft, pricing based on flights, seats, routes market and pricing based on conditions market conditions Australia  6,500 seats per week  140 tonnes freight per week  Australia – Sydney, Melbourne, Brisbane & Perth plus 2 points beyond Australia  Fiji- , plus 6 points beyond Fiji New  no capacity constraint Zealand  New Zealand – Auckland, Wellington & Christchurch plus 5 points beyond New Zealand  Fiji – Nadi plus 10 points beyond Fiji Fiji Airways 7 Air Access Air Service Agreements - Types of ASAs…cont

Traditional ASA Liberal ASA Open Skies

USA Unlimited (no seat/flight restrictions) & multiple points beyond

Hong Kong  no capacity constraint  Multiple points beyond excluding mainland China

Control Liberalization

Fiji Airways 8 Air Access Open Skies What is Open Skies? ♦ Highly Liberalised air service environment between sovereignties that allows unlimited access to all destinations/routes and often includes no restrictions on intermediate and beyond traffic.

♦ Open Skies is expected/promised to:

 boost flight frequency

 enhance connectivity

 increase traffic (passengers)

 lower ticket prices

Fiji Airways 9 Air Access Open Skies  Uncontrolled liberalising of ASAs does not create win-win situations

 Major beneficiaries are the larger/industrialised countries/airlines.

 Aviation history is littered with the carcasses of national airlines when smaller countries sign Open Skies with much bigger countries. This always works in the favour of the large carriers/countries.  For small island economies:

 There is no historic evidence of strong economic growth post liberalisation of skies

 Liberalisation leads to reduced stability of airline supply & less Government control

. Foreign Airlines will serve Fiji based on home economics & route profitability

. There may be a capacity growth but no evidence of real increase in tourist traffic

. Fiji could end up with excess capacity or undersupply (note the current situation of Tonga & the Cook Islands)

. Unfair competition can pose threats to jobs and long-term viability of National airline.

. Loss of foreign currency earnings 10 Fiji Airways

Strategic Role of Fiji Airways & Core Objectives

In past 10 years more than 80 small national carriers have failed/disappeared. Some of them are: ♦ Cyprus Airways ♦ Estonian Air ♦ Air Nigeria ♦ Ghana Airways ♦ Air Ivoire ♦ Air Gabon ♦ Air Jamaica ♦ Air Malawi ♦ Air Mauritanie ♦ Mexicana ♦ Armavia Airline ♦ Sabena ♦ Wings of Alaska ♦ Monarch Airlines ♦

11 Fiji Airways

Air Access

Way Forward Fiji Airways recommends the Government of Fiji to continue with its policy of controlled liberalisation.

Fiji Airways 12 Strategic Economic Impact – Fiji Airways

• Tourism is a major economic contributor with an average 4.8% growth over past 4 years

Tourism 2013 2014 2015 2016 2017 Growth 658,866 692,630 754,835 792,320 (Visitor 6.5% YTD Arrivals) -0.3% 5% 9% 5%

Fiji Airways 13 Strategic Economic Impact – Fiji Airways

• Significant role played by Fiji Airways:

 Growth in seats offered 2013 2014 2015 2016 2017

Capacity Growth 1,321,471 1,286,678 1,404,310 1,549,411 1,676,463 -3% 9% 10% 8%

 Growth in passengers

2013 2014 2015 2016 2017 FJ Passengers 979,542 1,033,869 1,108,664 1,156,570 1,297,780 Growth 6% 7% 4% 12%

Load Factor 79% 83% 82% 73% 77%

65% of all arrivals and departures carried by Fiji Airways

Fiji Airways 14 Strategic Economic Impact – Fiji Airways

• Significant role played by Fiji Airways:

 New Destinations

2016 2017 2018 2015 • Singapore • Adelaide • Wellington • San Francisco • San (seasonal) Francisco • Vava‟u (year round)

 Major foreign currency generator for Fiji  Keeping it within the economy

Fiji Airways 15 Strategic Economic Impact – Fiji Airways

• Significant role played by Fiji Airways

 TC Winston

Fiji Airways supported recovery initiatives through deep discounting fares

– approx. contribution of $45million

 Annual spend on marketing with offices in AU, NZ, US, HKG & SIN

2013 2014 2015 2016 2017

Spend ($million) 14,1 15,5 16,3 21,6 22,1

16 Strategic Economic Impact – Fiji Airways • Significant role played by Fiji Airways

 Growth in Codeshare and Interline Alliance Partners – improves penetration in the Destination

Air Caledonie Japan Delta Airlines Jetstar / KLM Royal Dutch Israel Airlines Airlines Malaysian Airlines Qantas Airways Shri Lankan Airlines Cathay Pacific Airways/ Virgin America DragonAir Jetstar Westjet

17 Strategic Economic Impact – Fiji Airways • Significant role played by Fiji Airways 4% organic growth  Objective to grow Fiji Airways by at least 8% per annum 4% new footprint

Passengers 5 Years 5 Years 10 Years 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

(million) 1,157 1,298 1,402 1,514 1,635 1,766 1,907 2,059 2,224 2,402 2,594 2,802

Aircraft

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Widebody 4 +1 +1 +1 +1 Narrowbody 5 +1 +1 +1

10 Year Plan

Widebody: 8 Narrowbody: 8 ATR: 3 Twin otter: 4

Current 15 increases to Total – 23 aircrafts 18

Strategic Economic Impact – Fiji Airways • Significant role played by Fiji Airways

 Provisional Growth Planned for 2018

Network Australia New Zealand North America Asia Pacific Islands

10.9% 8.1% 4.6% 5.5% 23.9% 21.0%

Provisional Growth by Market

30.0%

25.0% 23.9% 21.0% 20.0%

15.0%

10.0% 8.1% 5.5% 4.6% 5.0%

0.0% Australia New Zealand North America Asia Pacific Islands

19 Strategic Economic Impact – Fiji Airways Fiji (The Destination) in 10 Years

3 Years - 2020 Growth vs.17 Passengers 1,635m 23.10% ? Jets 11 Props 7 Fiji Infrastructure 5Years - 2022 has to grow to Growth vs.17 Passengers 1,907m 46.20% match this supply: Jets 13 Props 7 • Accommodation 10 Years - 2027 Growth vs.17 • Nadi Airport Passengers 2,802m 115.40% Jets 16 Props 7

20 Strategic Economic Impact – Fiji Airways To deliver the planned growth objective (8% per year), Fiji Airways must accomplish its 9 Critical Success Factors (CSFs) Critical Success Factors Values Vision Corporate Vision Statement To Be the Most Desired, Most Flown, Most Profitable Airline in the South Pacific Most Most Most Desired Flown Profitable

To be loved by our employees, to be loved by our partners and to be Connecting the Our relentless loved by our customers To be loved for: world to the pursuit for our unique Fijian Hospitality & South Pacific Service sustainable high with more direct performance • welcoming you to our home flights and our

• taking you on the journey to Partner where happiness finds you Networks

Fiji Airways 21 The Brand of Fiji Airways & Country Fiji (around world) are inseparable! Many of our CSFs directly impact „Brand Fiji‟

Brand Fiji

Accomplishing our 9 CSFs is progressing to plan –achievements for selected CSFs to date:

A number of major improvements underway to lift Service Quality

 New modern and fuel efficient aircrafts:  Landmark deal for acquisition of five new generation MAX 8 Aircraft – burns 15% less fuel First B737 MAX 8 arrives November 2018. Program costing in excess of US$500m.

 Expand and refresh Twin Otter fleet with acquisition of three brand new VIKING DHC-6 Series-400 Twin Otter aircraft plus option for 4th.

Fiji Airways 22 Brand Fiji  Uplifting Service Quality

 Completion of Phase 1 of the UP! Your Service Programme: . Inspiring Service Leadership sessions with Ron Kaufman . 1,140 Staff (83% of our team) have attended 2-day ‘Achieving Superior Service’ Workshops . 88 Staff have earned Bronze Star Awards for Stepping UP!

 Phase 2 of UP! Your Service Programme now launched: . Application Sessions to review and improve all systems and processes

Fiji Airways 23 Brand Fiji  Uplifting Service Quality – 12 Service Building Blocks Building Block Focus Areas The 12 Building Blocks of Service Culture Culture Customers Common Engaging Service New Service Service Staff Staff Language Vision Recruitment Orientation

Service Service Voice Service Communi- Recognition of the Measures cations & Rewards Customer & Metrics

Service Service Service Service Improvement Recovery & Bench- Role Process Guarantees marking Modeling People

Processes

Fiji Airways 24 Brand Fiji  Uplifting Service Quality

 Voice of the Customer . One of the 12 UP! Your Service Building Blocks is Voice of the Customer, where we get insights on what our customers think of us and the service they receive, and then use this information to self- evaluate for improvement

. There are various ways we currently receive feedback from our customers, both internal and external. These are: − Direct feedback via onboard Guest Feedback Surveys – 1500 completed forms per month from across our international network − Direct contact - total of 500 per month via emails and phone calls to Customer Care − „Tell Us‟ cards − Social Media – including Facebook, twitter, TripAdvisor − SKYTRAX – ongoing ratings

Fiji Airways 25 Brand Fiji  Uplifting Service Quality  New Customer Experience Team has already delivered significant product and service improvements

. Premier Service Team (PST) to take care of our special guests

. Full-time Executive Chef & new Celebrity Chef to improve menus and meal standards.

. Brand new “Premier Lounge” at Nadi (NAN) nearing completion – 2/3 weeks

(Already moved to new lounges in LAX and HKG)

Fiji Airways 26 Brand Fiji  Uplifting Service Quality  New Customer Experience Team has already delivered significant product and service improvements . iPads for entertainment in B737 and ATR 72 Cabins. . Headsets (IFE) can be used from gate- to gate. . Dedicated Quiet Zone on the A330-300 . More extensive IFE offering, with more movies, TV shows and music. . Introduced Children‟s Meals onboard. . Improved Frequent Flyer Benefits with Partner Airlines. − Qantas − American Airlines − Cathay Pacific − Alaska

Fiji Airways 27 Brand Fiji  Uplifting Service Quality  New Customer Experience Team has already delivered significant product and service improvements

. Resort Check-in product a great success, official launch on Monday (30 Oct).

. Bula Bid “Upgrade Now” System launched -new initiative which allows our Economy Class customers to bid for upgrades to Business Class on international flights

. Awards Won: − World Travel Awards – Australasia’s Leading Inflight Magazine − APEX – 4-Star Official Airline rating for Major Regional Airline

Fiji Airways 28 Brand Fiji  Uplifting Service Quality

? Encourage our Tourism Partners to continue to do the same –

STEP UP! SERVICE QUALITY

Fiji Airways 29 Brand Fiji  Establishing Fiji as a leading Aviation Centre of Excellence in South Pacific  Fiji Aviation Academy (FA) Project progressing to plan

. CAE Boeing 737 MAX 8 Full Flight Simulator – deal finalised. . CAE Full Flight Simulator – progressing well.

Fiji Airways Brand Fiji  Going Greener  Contribution to and support for Fiji‟s Presidency of the COP 23 Environmental Program

Logos across entire A330 and B737 fleet

 Carbon Offset Program “Every Take-off…One Tree”

Goal: 2,500 Actual no. of trees planted: 5,000+

 2018 Program – remove all inflight plastic bags from blankets, duvets, headsets, etc.

Fiji Airways 31 Brand Fiji  Going Greener – 2018 Program  Customer Carbon Offset Program

1. Implementing a Customer Carbon Offset Program 2. Purchase Carbon Offsets – integrated with booking systems (flow) 3. 100% of your contribution goes towards verified and accredited ‘Green’ Programs

 Deeper cuts in Carbon Emission New Generation Long Haul Aircraft - Currently undertaking a campaign for future replacement of our A330’s with new generation (Carbon Fibre) aircraft like AIRBUS 350 or BOEING 787 – burns 25% less fuel

Fiji Airways 32 Brand Fiji  Concluded for the First Time a ground-breaking partnership between Fiji Airways and Tourism Fiji (TF) to produce unprecedented benefits for both  Underpinned by a definitive MOU that generates synergistic results  Fiji Airways and TF combine their unique assets and attributes into a stronger brand platform which: 1. Supercharges the combined marketing efforts 2. Leverages the ‘tools’ and strengths of each party 3. Produces a cohesive and reinforced message to the world about the „Brand Fiji‟ 4. Saves cost  Fosters greater reach that neither could accomplish individually to robustly take the name „Fiji‟ around the world to the highest-potential markets  Creates combined branding and transactional activities for considerably more effective campaigns, ‘tell the story’, create the desire, book today. In other words, an immediate call to action  Access to global aviation data now gives TF greater clarity into future market demand  Allows TF to expand its reach and effectiveness of Familiarisation Programs

Fiji Airways 33 Fiji Airways has a 5 Year + 5 = 10 Year Master Plan

? Does rest of the Tourism Industry in Fiji have same & how do we align this

Fiji Airways 34 35 Brand Fiji Value Proposition – No Significant fare increase over past 10 years Average fares over the last 10 years – Economy Class (in FJD) Nadi – Sydney – Nadi Routes 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Nadi - Sydney 309 322 356 334 292 388 448 431 405 396 371 Sydney - Nadi 312 325 348 331 309 407 448 411 397 384 357 Nadi – Auckland – Nadi Routes 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Nadi - Auckland 294 289 295 291 310 334 365 390 417 410 356 Auckland - Nadi 299 292 291 302 332 359 377 407 439 424 363

Nadi - Sydney - Nadi Nadi - Auckland - Nadi Average Fares (in FJD) Average fares (in FJD) 500 500

400 400

300 300

200 200

100 100

0 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Nadi - Sydney Sydney - Nadi Nadi - Auckland Auckland - Nadi

Fiji Airways 36 Open Skies Playing Fields Not Equal Middle East Carrier (MEC) flying to Island Country

No correlation between MEC Capacity & Tourist Arrivals

NOTHING CREATED 700000 Just shifting traffic from Other airlines, driving many out of the NO CORRELATION market 600000 Average Annual Growth Rate (CAGR) 11 years 500000 MEC CAPACITY 400000 +18% 300000 TOURIST ARRIVALS

200000 +4%

100000

0 UAE TOURIST ARRIVALS 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 No change- 8001 arrivals in 2014

Fiji Airways 37